The Federal Government Emerges as Lone Star of the Dreary First Quarter – Real Time Economics

The economy had an unusual bright spot in the dreary first quarter: the federal government.

After two years of dragging on growth, the federal government’s economic output gave an annualized 3.2% lift to the overall economy in the first quarter, the Commerce Department said Friday. A series of spending cuts and last fall’s shutdown turned the federal government into a net drag on the economy in recent years, before last quarter’s reversal.

State and local government output, measured as real value added to the economy, shrank at a 1.4% pace. 

And the private sector (87% of the total economy) contracted at a 3.3% pace.

The net result: a 2.9% annualized contraction in gross domestic product. That amounted to the worst quarter for the economy since the recession ended in 2009.

The Commerce Department’s GDP by Industry report showed the first-quarter slowdown was wide spread. Of 22 industry groups tracked, 16 contributed to the decline in economic activity. The biggest setback came from business services. That sector alone contributed 0.8 percentage point to the overall contraction.

Manufacturing was one of the few industries to increase output, rising 2.1%, but the gain was entirely concentrated in production of nondurable goods. The subsector includes the processing of oil and other energy products.

The economy’s largest sector–finance, insurance and real estate–controlled a 0.6 percentage point to the contraction. That sector accounts for nearly 20% of the total U.S. economy.



for economic news and analysis

for central banking news and analysis

Get WSJ economic analysis delivered to your inbox:

Sign up for the WSJ’s Grand Central, a daily report on global central banking

Sign up for the Real Time Economics daily summary

If the article suppose to have a video or a photo gallery and it does not appear on your screen, please Click Here

25 July 2014 | 7:13 pm – Source:

Leave a Reply

Your email address will not be published.